Another tax question

Hi wise ones,

I purchased an IP at the beginning of last year. Purchase cost was $220,000. I also borrowed $20,000 to renovate which I spent on renos before searching for a tenant.

I'm a little confused about what this means at tax time...
1. Can I claim the interest on the $20,000 loan as a deductible expense? (I think not??)
2. Can the renovation costs be claimed, and if so at what rate? (I know it's not as a straight out loss.)
3. I have had a depreciation schedule done after the reno so does that mean that point number 2 is irrelevant??

I vaguely remember that its something to do with capital costs??? and just want to sort things properly before sending it all to the accountant :)

Excuse my ignorance on this one, and thanks in advance.

Allgood.
 
My opinion:

1. Yes
2. 2.5% capital works allowance, division 43
3. No. It's relevant. Allowable under division 40.
 
Get a QS to determine the depreciation allowances on the old and new parts of the premises - this will give you a far better result than a flat 2.5%
 
Get a QS to determine the depreciation allowances on the old and new parts of the premises - this will give you a far better result than a flat 2.5%

Indeed. It's likely that the renovation would partly consist of plant and equipment items that do not depreciate @ 2.5% over 40 years. Most plant and equipment items have a lifespan of 5-12 years (although some have shorter or longer lifespans) so you'd be cheating yourself if you only used 2.5%. For example, you could claim 16.7% of your oven's cost each year over 6 years using the diminishing value method.
 
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